New Zealand businesses are recommended to prepare for the rise in the adult minimum wage from the start of the new fiscal year.

The 1.5% increase in the minimum wage to $23.50 an hour is the smallest percentage increase in about three decades and follows the 2% rise last April to $23.15 an hour. However, New Zealand Council of Trade Unions Te Kauae Kaimahi Acting President Rachel Mackintosh describes it as a wage cut in real terms, given that the Reserve Bank forecasts inflation of 2%.

Workplace Relations and Safety Minister, Brooke van Velden, explains: “The New Zealand economy is still recovering from a sustained period of high interest rates and recessionary conditions. In that context, delivering a modest increase in the minimum wage strikes the right balance between supporting workers and limiting further costs on business.”

From 1 April, the starting-out and training minimum wage rates will be set at $18.80, remaining at 80% of the adult minimum wage.

Preparing for the increases

Employment New Zealand says the first step you should take is to notify employees on the minimum wage about the increase by sending them a letter or email highlighting the variation in their employment contract.

Next up is to ensure your payroll provider, accountant, lawyer, HR or finance people are ready to implement the change.

“If your system is manual or computer-based, you should check and confirm the settings will be adjusted for the new rates,” says Employment New Zealand.

“If any of your employees are on starting out or training wages, now is a good time to check when they will be eligible to move onto the adult rate.”

Employment New Zealand adds that now is an ideal time to talk to employees if any of their agreements (contracts) are not current or if you did not give one to them.

“Update the contract with any terms and conditions that were agreed to by both parties before the contracts were last reviewed,” it says. “Make sure they include all the mandatory clauses a contract should have by law.”

Employment New Zealand recommends using their employment agreement builder if your employees do not have a contract.

It also recommends looking into the potential impacts on your business from internal wage relativity and external benchmarking. This includes examining how employees are paid compared to each other and how your pay rates compare to others in your industry or sector.

This is because employees on higher wages may want to negotiate a pay increase to keep the relative difference.

Crucially, you should update your business budget by adding any expected increased costs to your short and medium-term budget forecasts. This will help you plan for and manage the effect of higher wages and holiday pay liabilities.

You may also want to review the prices of your goods and services considering the wage increase and communicate changes to customers in advance.

Note that all employees must be paid at least the minimum wage for every hour they work irrespective of whether they are full-time, part-time, fixed-term, casual or migrant workers, or whether they are paid by wages, salary or commission.

Remember, too, that the minimum wage does not apply in some situations, for example, if employees are under 16 years of age or a labour inspector has issued a minimum wage exemption permit to an employee who has a disability that limits them from carrying out their work.

Managing expectations

According to the Robert Half 2025 Salary Guide, complex salary dynamics are at play in the current job market this year.

“Salary issues plague the current work environment,” explains Megan Alexander, managing director of Robert Half.

“Employers, facing budget constraints and prioritising cost management, are struggling to meet employees’ demands for higher pay after years of stagnant wages despite their hard work and need for financial stability.”

Indeed, Robert Half’s research shows that remuneration is top of mind for many employees. It found that pay is the primary objective for about a third (32%) of New Zealand workers from their jobs in 2025. However, the proportion rises to almost two-thirds (62%) of workers when asked to rank their top three preferences.

Robert Half also found that most (87%) employees are concerned about inflation outpacing salary increases this year.

The research advises employers to consider other options when pay requests cannot be offered.

“Even if you can’t match requested salaries dollar-for-dollar, look for other areas of value,” it notes.

“Focus on those areas that employees value too. This could include increased flexibility, professional development opportunities or enhanced recognition programmes. Exploring creative solutions and demonstrating your commitment to employee wellbeing will stand you in good stead among your workforce.”

Robert Half also suggests being open and honest with employees about the company’s financial situation and/or other reasons why a pay rise can’t be rewarded.

It adds that there are many cost-effective ways to invest in employees’ growth and development, such as providing employees with a mentor or secondment placements.

In addition, it says intangible benefits can be beneficial in retaining staff. For example, employees may find it difficult to leave a positive and supportive work environment that embraces a culture of recognition, appreciation and work-life balance.

Financial facilities to ensure business stability

If you’re searching for stability in the current economic climate, there are several financial facilities and support services to help you achieve your goals. With the start of new financial year, it’s a good time to explore your options. ScotPac offers products designed to help your businesses remain stable and grow, even in challenging economic conditions.

Stabilise your business with ScotPac

ScotPac has been helping New Zealand businesses survive and thrive with fast and flexible finance solutions for decades. Our commercial funding options include:

All our facilities are designed with the needs of New Zealand business owners top of mind. Plus, they’re all completely customisable, so you can benefit from a tailored funding solution that suits your business’s needs.

To find out more about our Invoice Finance, Trade Finance or Business Loan solutions or to discuss your goals for your business for the upcoming financial year, get in touch with ScotPac’s lending specialists today.